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Cryptocurrency

What are the Risks of Buying Cryptocurrency?

This website and article do not offer legal, tax or investment advice.

Cryptocurrency Myths

Cryptocurrency is not only a speculative investment. Retail adoption increases rapidly and as of this writing over $10 billion worth of transactions settle every day. Also it should be noted that mining with renewable energy approaches nearly 50%. 

Naysayers have attacked decentralized-digital-currencies since their humble beginnings. As Bitcoin, the cryptocurrency poster child, continues to strengthen its position as a usable global currency these quotes have lessened. Various high-profile titans of industry have eaten their words by announcing personal and corporate investment.

Even with the potential upsides of decentralized currency there exists heavy risks to investment. Consider risks associated with any investment, other risks related to consumer use and specific risks related to the blockchain and its token.

Financial Loss

As with any investment be financially prepared to lose the funds. Therefore any investment made should be an amount you can afford to lose and still maintain financial responsibility.

Volatility

Immediately after a token purchase the price of your asset will move. The direction it moves while you own it will define a loss or a profit. 

Theft

As with any valuable there are individuals who work at stealing them on a full-time basis. Keeping your account unsecured could result in successful hacking attempts. Even when secured, the exchange is constantly fending off attacks.

Actual Utility

While retail adoption grows, currently there exists few ways to spend tokens on real-world items or services. High transaction fees on the Bitcoin blockchain also inflate the cost of consumer transactions, often pushing prices higher than MSRP. Some blockchains have slower transaction time where others may have much faster transfers but may not be accepted where you want to spend.

Regulation

Some governments have outright banned the use or ownership of cryptocurrency. This can happen at any time especially where cryptocurrency is not yet regulated. Unregulated currency also has far less legal protection if any. 

Poor Recourse for Issues

Should your crypto wallet get hacked or nefarious humans or bots defraud you out of your own digital asset there exists very few avenues to pursue legal solutions or even investigate properly. Even the exchanges you choose for investment purchases and sales should be insured against successful attacks on your money.

Legality

Being aware of local and federal laws takes constant effort. While cryptocurrency may be legal where you live it could very well become illegal to use or own. Tax laws and accounting practices must be understood to maintain a legal status and a good standing with various government agencies such as the United States Internal Revenue Service (IRS).

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